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Toronto sells McDonald's site for a bargain

The city has decided to sell a prime piece of land on the Bloor St. W. strip for a bargain price and expects the property to be flipped quickly to allow a 100-metre condo tower on the site.

The city has decided to sell this prime piece of real estate on Bloor St. just west of Avenue Rd. to the McDonald’s restaurant chain for $3.38 million. (TORONTO STAR GRAPHIC)

By Paul Moloneycity hall bureau

Thu., March 6, 2008

The city has decided to sell a prime piece of land on the Bloor St. W. strip for a bargain price and expects the property to be flipped quickly to allow a 100-metre condo tower on the site.

After a closed-door session, city council voted 28-4 yesterday to accept the original offer of $3.38 million made by McDonald's for the site the restaurant chain occupies with a cheap 99-year lease, across from the Royal Ontario Museum.

Local councillor Adam Vaughan said he understands that McDonald's plans to resell the land to Kazakhstan-based developer Bazis International Inc., which is building an 80-storey condo building down the street at 1 Bloor and already owns the lot adjacent to McDonald's.

The chain would get a new restaurant in the building as part of the deal.

Just two weeks ago, a blue-ribbon panel that examined the city's books concluded Toronto could do a better job of managing its massive real estate portfolio, and said the city could realize an extra $150 million a year from asset sales.

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Some estimates had suggested the site could be worth $7 million to $9 million, though its desirability could be limited by the long lease McDonald's holds on the land.

Councillor Cliff Jenkins, a member of the government management committee who was among those objecting to the sale, said the city could entertain a higher offer in future while continuing to lease.

"We should be prepared to renew the lease and at least keep it in our hands, and not give it away at bargain-basement prices," he said.

He conceded the long-term lease reduces the value of the property, but not by that much.

"We should not allow it to put a gun to our heads," Jenkins said. "In my opinion, we're not getting a good deal."

But Vaughan said there are advantages to the sale despite the relatively low price, such as being able to limit the height of the proposed development to 100 metres – 20 metres shorter than the 28-storey condo under construction nearby at 1 Bedford Rd.

McDonald's would be part of the street-level retail shops incorporated into the building, with condos above, he added.

"McDonald's simply flows the property through to Bazis and, in return for flowing it through to them at basically the price they paid for it, they get their building demolished and a new building put in place. Effectively they get replaced on site with a better building."

McDonald's was pleased with council's decision, said company spokesperson Louis Payette.

"It has always been our goal to reach a fair agreement with the city on this property and firmly believe this decision is in the best interests of both parties," Payette said.

The government management committee had recommended the city continue to lease the site.

The restaurant chain had been paying rent of just $15,500 a year, which the city had hoped to raise to $195,000 annually.

Councillor Cesar Palacio was another member of the committee who objected to the price, saying that, "personally, I don't think that we're getting the best value for the taxpayers' money."

Vaughan said detractors should look at the overall benefit a redevelopment would bring to the stretch of Bloor west of Avenue Rd.

"On a pure real estate transaction, yeah, the money on the table probably isn't what the land is actually worth," he said.

"The most important thing is what gets built there is a positive contribution to the development of the Annex as it faces Bloor St.," Vaughan said.

"The money has to make sense, but the most important thing is the neighbourhood to the north is protected."

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